FM says MDR on UPI applies to merchants, not customers; fintechs, banks will invest more on security

New Delhi: Finance Minister Nirmala Sitharaman on Thursday said the Merchant Discount Rate on digital transactions applies to merchants and not to customers, and the MDR charge would support banks and fintech to invest more on infrastructure and security.

Hitting out at Congress leader Jairam Ramesh over his remark that ordinary people may have to pay more for using UPI, Sitharaman, in a post on X, said the UPI and Services Steering Committee headed by NPCI is yet to decide on the MDR, which would happen only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026.

Read more: UPI MDR explained: What potential charges above Rs 2,000 payments on Paytm, GPay & other apps mean for you and merchants


Through the bill, the government has proposed that the central government can decide, via a notification, which electronic payment modes or transactions would remain free.

Ramesh, in a post on X, alleged that the burden of MDR will fall on ordinary people, and the government's claim that this is the only way to keep UPI financial sustainable is "entirely wrong".

Replying to Ramesh, Sitharaman said, "Before spreading a canard, @Jairam_Ramesh ji, please consider this: Merchant Discount Rate (MDR) applies only on the merchants and not on the end users/customers. It will support the Banks & Fintech to invest more on infrastructure, innovation & security. All users of UPI will reap the benefits of this investment."

Read more: India paves way for return of merchant fees on digital payments


Sitharaman also said that a committee will decide on the MDR only after Parliament passes the Taxation and other laws (amendment) Bill.

Referring to the opposition protest in Parliament since the beginning of the Monsoon session on July 20, which has disrupted the proceedings of both the Lok Sabha and Rajya Sabha, Sitharaman said the bill "could have been discussed on the floor of the House if your party @INCIndia engages constructively in Parliament when the Bill was/is tabled. (LS/RS respectively)".

Through the Taxation and other Laws (Amendment) Bill, 2026, the government proposes to amend Section 10(A) of the Payment and Settlement Systems Act, 2007, which gives legal backing to the government to modify the zero-MDR framework on UPI and RuPay card transactions.

While the Bill itself neither introduces a merchant discount rate (MDR) nor specifies a fee, it creates the legal backing for the government to modify the zero-MDR framework later.